What is a Home Warranty and How is it Different from Home Insurance

A home warranty is a contract for coverage of the homes systems and appliances. They usually cost somewhere in the range of $250-$400. The warranty is usually for one year, but home warranties can be different. An example would be a warranty for a coverage term of two years. Either the buyer or seller can pay for the home warranty.

Appliances or systems must be in working order before the warranty begins, or it will not be covered. Other things that would keep you from getting the coverage you paid for would be abnormal wear and tear, improper installation, code violations, or improper maintenance.

Should you get a home warranty? It all really depends on you and the home you are purchasing. If the home you are purchasing is 15 years old and none of the appliances have been replaced, or other maintenance kept up on, it’s probably a good idea to get the coverage. If the home you are purchasing is a 2 year old home that has been well maintained, you are probably better off saving the $250-$400.

Homeowners insurance typically covers your home and its contents against damage and theft. It also will protect you if someone injures themselves on your property. If there is some insured reason you cannot live in your home the policy should cover living expenses. There are more specific types of insurance policies such as flood, or earthquake insurance. These are generally separate policies from the average home insurance policy. Homeowners insurance policies can vary quite drastically. Price is greatly impacted by the liability limit, which is the maximum amount the insurance will pay out.

Homeowners insurance is very important. Whatever properties you are responsible for should be insured. I would even highly recommend renters insurance for any tenant.  As far as I am concerned you need to make sure you can afford homeowners insurance because it’s not optional. To not have it would be a huge unnecessary risk. A home warranty is generally a good idea, but it isn’t a necessity.

You might ask yourself: If I have a home warranty do I need to carry homeowners insurance? The answer is yes. A home warranty will not cover nearly as many things as homeowners insurance will. A home warranty is mostly for the systems and appliances in your house. The systems in your house refer to things such as your heat, AC, plumbing, electric, etc.  Homeowners insurance will cover the rest of your house, and any other liabilities. Another advantage of the home warranty is if one of your systems or appliances does fail you shouldn’t have to make a claim on your homeowners insurance; That will definitely save you money should something happen.